Will the Lender Keep the Remaining Equity of My Reverse Mortgage
As a reverse mortgage specialist you might imagine I get slaughtered with questions from customers. One of the biggest concerns is what happens to the equity in the home after the borrower passes on.
A reverse mortgage lender loans money, typically anywhere from 50% to 75% of homes value, to the borrower. The borrower uses that money as he or she sees fit.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage lenders use a calculation, based upon value, age, and interest rates to determine the amount to lend. This calculation creates a recognized safe position for banks.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
At death the home is typically willed to the heirs. The heirs are given roughly a year to sell the home. If it takes longer the lender normally allows extensions.
Remember, a reverse mortgage lender makes money while the home is accumulating interest. It doesnt want to take the home back. So, as long as the heirs abide by FHA guidelines while selling the home, the lender will offer extensions.
It will eventually sell. When the home sells the bank is repaid the original principal amount loaned plus accumulated interest over the years. That is all the bank is entitled to receive.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Sooner or later a borrower lives fifteen years longer than expected, the actuarial tables explode, and the mortgage exceeds the value of the house. No problem.
The HECM or reverse mortgage is a non-recourse mortgage. This means the most the bank is entitled to receive is the sale price of the home minus closing costs. If more is owed, too bad for the bank.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
A reverse mortgage lender loans money, typically anywhere from 50% to 75% of homes value, to the borrower. The borrower uses that money as he or she sees fit.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage lenders use a calculation, based upon value, age, and interest rates to determine the amount to lend. This calculation creates a recognized safe position for banks.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
At death the home is typically willed to the heirs. The heirs are given roughly a year to sell the home. If it takes longer the lender normally allows extensions.
Remember, a reverse mortgage lender makes money while the home is accumulating interest. It doesnt want to take the home back. So, as long as the heirs abide by FHA guidelines while selling the home, the lender will offer extensions.
It will eventually sell. When the home sells the bank is repaid the original principal amount loaned plus accumulated interest over the years. That is all the bank is entitled to receive.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Sooner or later a borrower lives fifteen years longer than expected, the actuarial tables explode, and the mortgage exceeds the value of the house. No problem.
The HECM or reverse mortgage is a non-recourse mortgage. This means the most the bank is entitled to receive is the sale price of the home minus closing costs. If more is owed, too bad for the bank.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
About the Author:
Bone-up onCalifornia reverse mortgage here. Many questions answered regarding the reverse mortgage of California EDU site.
posted by Debt Consolidation Loan at
9:15 AM
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